TL;DR

BRC-20, launched in March 2023, is an experimental standard for creating fungible tokens on Bitcoin using ordinal inscriptions, broadening its use beyond a currency.
It inscribes JSON data on satoshis for token operations, needing Taproot wallets and external indexers, but lacks smart contract capabilities.
As of April 2025, over 50 BRC-20 tokens have a $326 million market cap, with ORDI ($164 million) and SATS ($98 million) leading.
Causes network congestion and divides Bitcoin purists who see it as deviating from Bitcoin’s original purpose.

Overview

Since its launch in 2009, Bitcoin has served as the preeminent cryptocurrency, valued for its robust security and decentralized architecture. Primarily recognized as a digital store of value, its minimalist framework has constrained its use for more complex applications.

The introduction of BRC-20, a novel token standard debuted in March 2023 by an anonymous developer named Domo, marks a significant evolution. By facilitating the creation of fungible tokens on the Bitcoin blockchain, BRC-20 broadens its utility, potentially supporting diverse applications from digital assets to community initiatives. As of April 2025, the BRC-20 ecosystem encompasses over 50 tokens with a combined market capitalization of $326 million (CoinGecko, n.d.).

What is BRC-20?

BRC-20 is a token standard that enables the creation of fungible tokens on the Bitcoin blockchain. Fungible tokens are interchangeable digital assets, akin to physical currency, where each unit holds equal value.

Unlike Ethereum’s ERC-20 tokens, which rely on programmable smart contracts, BRC-20 utilizes “ordinal inscriptions” to embed token-related data onto satoshis—the smallest unit of Bitcoin, where one Bitcoin equals 100 million satoshis. This approach allows token creation within Bitcoin’s existing framework, making it accessible without requiring advanced technical expertise (Chainlink Education Hub, 2023).

As an experimental standard, BRC-20 is still under development, with its community actively refining its capabilities. Despite its nascent status, tokens such as ORDI and SATS have gained prominence, reflecting growing interest and market adoption.

Historical Background

BRC-20 is built upon the Ordinals protocol, introduced in January 2023 by developer Casey Rodarmor. The Ordinals protocol assigns unique identifiers to satoshis, enabling the attachment of data such as text or images. BRC-20 leverages this capability to inscribe token instructions, capitalizing on Bitcoin’s Taproot upgrade, which enhances its capacity to handle larger data sets. This foundation underpins BRC-20’s ability to integrate seamlessly with Bitcoin’s infrastructure.

How BRC-20 Works

The BRC-20 standard operates by inscribing JSON (JavaScript Object Notation) data onto satoshis using the Ordinals protocol. These inscriptions serve as directives for token operations, including creation, minting, and transferring, offering a straightforward method to manage tokens on Bitcoin.

Mechanics of Token Creation

To establish a BRC-20 token, a user inscribes a JSON object onto a satoshi, specifying key parameters such as the token’s name, total supply, and minting limits. For example, a token creation inscription might appear as follows:

{
"p": "brc-20",
"op": "deploy",
"tick": "star",
"max": "1000000",
"lim": "100"
}

This inscription defines a token named “STAR” with a maximum supply of 1 million tokens and a minting cap of 100 tokens per transaction. Subsequent inscriptions facilitate minting or transferring tokens, with each action recorded on the Bitcoin blockchain for permanence. However, tracking token ownership requires external indexers, as Bitcoin’s native system does not process token-specific logic (Chainlink Education Hub, 2023).

What Does One Need to Play With BRC-20?

Participation in BRC-20 activities necessitates a Taproot-enabled Bitcoin wallet, which supports the enhanced data capabilities introduced by the Taproot upgrade. External indexers are essential for monitoring token balances and transaction histories, introducing a dependency on off-chain tools. This structure highlights BRC-20’s experimental nature, as it operates outside Bitcoin’s core consensus mechanisms.

Operational Constraints

Unlike smart contract-based systems, BRC-20 lacks programmable functionality, restricting it to basic token operations. Additionally, BRC-20 transactions can be significantly larger—up to 4MB—compared to standard Bitcoin transactions, which typically measure in kilobytes. This size disparity poses challenges for network efficiency.

Significance of BRC-20

BRC-20 represents a transformative development for Bitcoin, expanding its role beyond a digital currency. By enabling fungible tokens, it positions Bitcoin as a platform for innovative applications, challenging the notion that it is limited to financial transactions.

Market Developments

As of April 2025, the BRC-20 ecosystem comprises over 50 tokens with a collective market capitalization of $326,262,541 (CoinMarketCap, n.d.). Prominent tokens, such as ORDI ($164 million) and SATS ($98 million), underscore significant market traction, with trading platforms like CoinGecko and CoinMarketCap facilitating their visibility and liquidity.

BRC-20’s native integration with Bitcoin’s blockchain eliminates the need for auxiliary networks, enhancing its accessibility. By leveraging Bitcoin’s proof-of-work consensus, widely regarded as the most secure in the industry, BRC-20 offers a trusted foundation for token-related activities, appealing to developers and users seeking reliability.

Comparison with ERC-20

To contextualize BRC-20, a comparison with Ethereum’s ERC-20 standard, the leading framework for fungible tokens, is instructive. While both standards enable token creation, their approaches and capabilities differ significantly.

Key Distinctions

Blockchain Platform: BRC-20 operates on Bitcoin, while ERC-20 is native to Ethereum.
Mechanism: BRC-20 employs JSON inscriptions via the Ordinals protocol, whereas ERC-20 utilizes smart contracts for programmable operations.
Functionality: BRC-20 supports basic token creation and transfer, while ERC-20 enables complex applications, such as decentralized exchanges or lending platforms.
Security Model: BRC-20 benefits from Bitcoin’s proof-of-work, while ERC-20 relies on Ethereum’s proof-of-stake.
Ecosystem Maturity: Ethereum’s extensive developer community contrasts with BRC-20’s smaller, emerging network.

Relative Strengths

BRC-20’s simplicity and reliance on Bitcoin’s infrastructure make it user-friendly and secure, ideal for straightforward token projects. Conversely, ERC-20’s programmability supports sophisticated applications, catering to developers requiring advanced functionality. Several BRC-20 tokens have emerged as leaders, illustrating the standard’s versatility and market appeal. Here are a few examples:

ORDI

As the inaugural BRC-20 token, ORDI commands a market capitalization of approximately $164 million as of April 25th, 2025, serving as a flagship for the standard. Its prominence highlights the potential for Bitcoin-based tokens to attract substantial interest.

SATS

Named after Bitcoin’s smallest unit, SATS holds a market value of $98 million, as of April 25th, 2025, resonating with enthusiasts who value its alignment with Bitcoin’s foundational principles.

For more related tokens, you may find more info from CoinEx’s BRC-20 page.

Applications of BRC-20

BRC-20’s potential applications are varied, offering opportunities for users across the crypto spectrum.

Asset Tokenization

BRC-20 tokens can represent ownership of digital or physical assets, such as artwork, real estate, or commodities. By leveraging Bitcoin’s secure blockchain, these tokens ensure transparency and trust, facilitating asset management and exchange.

Simplified Financial Tools

While Bitcoin lacks native smart contract support, BRC-20 could enable basic financial tools, such as peer-to-peer lending or token trading, particularly when paired with layer-2 solutions like the Lightning Network. These applications could broaden Bitcoin’s financial utility.

Community Initiatives

Tokens like PEPE illustrate BRC-20’s suitability for community-driven projects, fostering engagement through shared interests or cultural identities. Such tokens can incentivize participation or reward contributions within groups.

Innovative Uses

The Ordinals protocol’s data inscription capabilities enable creative applications, such as digital certificates, event tickets, or promotional tokens. These use cases, though constrained by Bitcoin’s simplicity, highlight BRC-20’s versatility.

Challenges and Criticisms

Despite its promise, BRC-20 has sparked considerable debate within the Bitcoin community, reflecting both technical and philosophical concerns.

Network Congestion

BRC-20 transactions, due to their larger data size, contribute to network congestion. In May 2023, a surge in BRC-20 activity led to a significant backlog of unconfirmed transactions, increasing fees, and highlighting Bitcoin’s scalability limitations. This issue poses a critical challenge to the standard’s sustainability.

Philosophical Tensions

Some Bitcoin advocates, including prominent developers, contend that BRC-20 deviates from Bitcoin’s original purpose as a peer-to-peer electronic cash system. They view the additional data as unnecessary, potentially undermining the blockchain’s efficiency and focus. This debate underscores broader questions about Bitcoin’s evolving role.

Technical Dependencies

BRC-20’s reliance on external indexers for tracking token ownership introduces vulnerabilities, as disruptions in these tools could lead to discrepancies. Furthermore, its lack of programmable functionality limits its scope compared to other blockchains, while its semi-fungible nature, due to unique inscriptions, complicates token uniformity.

Advantages of BRC-20

BRC-20 offers several compelling benefits:

Native Integration: Functions directly on Bitcoin’s blockchain, leveraging its established infrastructure.
Unparalleled Security: Utilizes Bitcoin’s proof-of-work consensus, ensuring robust protection for token activities.
User Accessibility: Simplifies token creation, requiring minimal technical knowledge.
Community Engagement: Encourages collaborative innovation through its open-source framework.

Limitations of BRC-20

However, the standard faces notable constraints:

Scalability Issues: Large transaction sizes exacerbate network congestion, impacting performance.
Functional Restrictions: Limited to basic operations, lacking the versatility of smart contract-based systems.
Indexer Reliance: Depends on external tools for token tracking, introducing potential risks.
Emerging Ecosystem: A smaller developer community compared to other platforms may hinder progress.

What is the Future of BRC-20?

The future of BRC-20 holds both promise and uncertainty. Its $326 million market capitalization and expanding token portfolio reflect strong initial adoption, yet its long-term success depends on addressing technical and philosophical challenges. Potential advancements, such as layer-2 scalability solutions or alternative standards like Bitcoin Runes, could enhance its efficiency and functionality. Additionally, the proliferation of Taproot-enabled wallets and improved indexing tools may streamline user experiences, enabling broader acceptance.

References

Chainlink Education Hub. (2023, November 30). What Is a BRC-20 Token? Retrieved from https://chain.link/education-hub/brc-20-token
CoinGecko. (n.d.). Top BRC-20 Coins by Market Cap. Retrieved from https://www.coingecko.com/en/categories/brc-20
CoinMarketCap. (n.d.). Top BRC-20 Tokens by Market Capitalization. Retrieved from https://coinmarketcap.com/view/brc-20/

What Is BRC-20: A New Way to Create Tokens on Bitcoin